Automobile and other manufacturers often offer rebates or other incentives to stimulate purchasers to buy certain products during an offer period. They also offer rebates in an attempt to “fine-tune” the price of the product to achieve market equilibrium. Various problems and drawbacks exist with rebate programs and the methods by which they are implemented.
For example, often a manufacturer will spend a significant amount of money on national or regional mass market advertising to promote a rebate program. This can add significantly to the cost of the rebate program. The mass market advertising approach often is over inclusive or under inclusive with respect to the group of likely potential buyers. This leads to market inefficiencies.
Over-incenting leads to lower profit margins, and under-incenting leads to excess inventory. Other drawbacks include the lead time necessary to implement a rebate program, the lack of meaningful information about potential purchasers and what would prompt them to buy at any given time, and the inability to effectively target individual or specific groups of purchasers, among other drawbacks.